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(Fox News)   So it's the Monday after sequester...what happened to all the doom, gloom, mayhem, and despair predicted by the White House? White House: Um, yeah, we might have been exaggerating a little. Still the Republicans' fault, though   (foxnews.com) divider line 261
    More: Obvious, Kentucky Republican, White House, Senate Republican Leader, Kelly Ayotte, wage earners, Gene Sperling, military sciences, Mitch McConnell  
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776 clicks; posted to Politics » on 04 Mar 2013 at 8:01 AM (1 year ago)   |  Favorite    |   share:  Share on Twitter share via Email Share on Facebook   more»



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2013-03-04 10:06:42 AM  

MindStalker: Normally yes, but bond rates are at record lows because they are set low to encourage banks to loan and create a stimulative effect. Once other interest rates rebound and people start looking elsewhere to put their money, bond rates will be forced to rise.


You are assuming that the government has control over bond yields.  They don't, yields are set by the market.  Of course, they could simply print money and buy bonds to keep yields low, but that is a surefire recipe for disaster.
 
2013-03-04 10:06:43 AM  

NateGrey: SlothB77:

Arent you the idiot that said 30,000 illegals were let go into the street because Rush told you?



You are correct sir.
 
2013-03-04 10:07:29 AM  

cameroncrazy1984: China isn't even buying all of our new debt NOW.


Sure - The Federal Reserve is.  I'm sure you think that is a sustainable and smart practice, of course.
 
2013-03-04 10:08:29 AM  

MattStafford: MindStalker: Normally yes, but bond rates are at record lows because they are set low to encourage banks to loan and create a stimulative effect. Once other interest rates rebound and people start looking elsewhere to put their money, bond rates will be forced to rise.

You are assuming that the government has control over bond yields.  They don't, yields are set by the market.  Of course, they could simply print money and buy bonds to keep yields low, but that is a surefire recipe for disaster.


http://www.ehow.com/about_6828637_prime-interest-rate-effect-bonds.h tm l

Sorry, it appears that your economics degree missed this little tidbit.
 
2013-03-04 10:08:35 AM  

MattStafford: Tomahawk513: IF our bond yields go up. IF. Which means our economy would have to be stronger. Which means government revenue would grow, which means we should be able to stop borrowing and eventually pay down our debt, until this whole cycle repeats itself again. Relax dude.

Why would our economy have to be stronger for bond yields to go up?  In fact - that is the opposite of what would happen.  Why would you demand higher rates from a stronger economy?


That sounds like a claim, maybe the makings of a prediction. Care to elaborate on that?

Why would you demand higher rates from a stronger economy?

Really? You don't know how bond prices and yields can change during a boom economy?

Oh that sure was hard info to find. Bond prices drop in a good economy, because people tend to have more cash to put into stocks. They're not as interested in parking their money in a bond at that point, because in general, the bond-selling institution has more revenue and is selling fewer bonds. They're actually making and doing sh*t worth investing into via stock. For the government, this means during a boom it's paying down debt due to increased revenue, thanks to higher tax rates, and citizens having more money to spend. So bond prices drop and yields go up. Its an inverse relationship. Hence right now where bonds are expensive and yields are crap. (Thank jebus I got into a TIPS fund when I did).

So not only have people pointed out you're wrong about your, "But the bond yields!" argument loop, they're now using Investopedia to show you don't know the basics of the goddamned stock market.

Coconuts.
 
2013-03-04 10:10:23 AM  

MattStafford: cameroncrazy1984: China isn't even buying all of our new debt NOW.

Sure - The Federal Reserve is.  I'm sure you think that is a sustainable and smart practice, of course.


Intragovernment debt holdings currently stand at about $4.6T. Out of a total of about $16T

I'm sorry, you were saying something about the government buying all of our new debt?
 
2013-03-04 10:11:04 AM  

cameroncrazy1984: MattStafford: cameroncrazy1984: China isn't even buying all of our new debt NOW.

Sure - The Federal Reserve is.  I'm sure you think that is a sustainable and smart practice, of course.

Intragovernment debt holdings currently stand at about $4.6T. Out of a total of about $16T

I'm sorry, you were saying something about the government buying all of our new debt?


Oh, and of THAT, the Fed owns about $1.66T
 
2013-03-04 10:11:46 AM  

cameroncrazy1984: China entering into bilateral agreements with other countries is not evidence that demand for US treasuries will be lower than it is now.


Perhaps in your fantasy world.  If the dollar loses reserve status, demand for Treasuries will collapse.  China entering into agreements to bypass the dollar is evidence that the dollar's reserve status is at least a little bit threatened.  Combine that with various other actions going on, as I've detailed throughout other threads, and the situation is far more worrisome than you give it credit.
 
2013-03-04 10:13:18 AM  

MattStafford: China entering into agreements to bypass the dollar is evidence


No, it isn't. You have yet to be able to provide evidence that they are entering these agreements "to bypass the dollar"
 
2013-03-04 10:13:59 AM  
Now that we have all these savings from the cuts and since it didn't hurt too bad, we should probably pass an upper class tax cut. They can then create some jobs to take up the slack.
 
2013-03-04 10:14:06 AM  

cameroncrazy1984: http://www.ehow.com/about_6828637_prime-interest-rate-effect-bonds.h tm l

Sorry, it appears that your economics degree missed this little tidbit.


Its almost like you didn't read my post.  The Federal Reserve can print money and buy Treasuries, but in that capacity they are acting as a market participant - and buying new debt with freshly printed currency is an extremely dangerous practice, which, if continued, will surely lead to disaster.
 
2013-03-04 10:14:18 AM  

MattStafford: MindStalker: Normally yes, but bond rates are at record lows because they are set low to encourage banks to loan and create a stimulative effect. Once other interest rates rebound and people start looking elsewhere to put their money, bond rates will be forced to rise.

You are assuming that the government has control over bond yields.  They don't, yields are set by the market.  Of course, they could simply print money and buy bonds to keep yields low, but that is a surefire recipe for disaster.


Only if you consider inflation a disaster. The rich certainly do. Middle class homeowners see it as a mixed bag. Sure, you buy less stuff, but paying the mortgage isn't a big deal anymore.

Maybe the Democrats should frame the issue that way? The rich better get comfortable paying more taxes, because the inflation caused by NOT addressing this problem will hurt a whole lot more.
 
2013-03-04 10:14:21 AM  

MattStafford: BeesNuts: I don't doubt that the bond market will go through some kind of alteration in the next decade or two. Nor do I doubt that interest rates will rise, also in that time frame. I struggle with the same thing I struggled with before the specific culprit of bond yields arose

There is evidence that demand for US Treasuries will be lower in the future than it is now.  Lower demand means higher yields.  The US cannot afford higher yields on its debt, and if subjected to higher yields, would face an extremely serious economic (and social) crisis.  What more do you need to understand that there is a serious problem with our current financial situation?


Of course there will be higher yields in the future.  We're at a record low because of a farking global economic collapse.  When those higher yields come, they will apply to new debt, not the existing obligations.  Our current ability to borrow is practically at will and what's more the rates on our new debt are such that when inflation is taken into account we will end up paying a negative return in real dollars.  In short, this is not an immediate concern.  We can devise a tax structure that would allow us to do some borrowing now to pay for jobs to keep our roads and bridges from collapsing and still be able to pay that debt off in 30 years.
 
2013-03-04 10:14:34 AM  

MattStafford: NateGrey: Shut up Fark Coconut Economist, you cock.

I'm guessing you still believe that China is going to be buying all of the new debt we issue in the next few years, and simply want to cover your ears when I present evidence why this is not the case, and is a serious problem.


lol You are kidding right? You never provide evidence. You simply make stupid statements and are called out on it. You are the guy who tried to use an isolated island as an analogy for the Economy? The same guy who tried to equate the US Budget to a Household Budget when even Rush Limbaugh says thats wrong? Absolutely and utterly stupid.
 
2013-03-04 10:14:43 AM  

cameroncrazy1984: MattStafford: China entering into agreements to bypass the dollar is evidence

No, it isn't. You have yet to be able to provide evidence that they are entering these agreements "to bypass the dollar"


Evidence? Where he's going he doesn't need evidence.
 
2013-03-04 10:16:14 AM  

MattStafford: cameroncrazy1984: http://www.ehow.com/about_6828637_prime-interest-rate-effect-bonds.h tm l

Sorry, it appears that your economics degree missed this little tidbit.

Its almost like you didn't read my post.  The Federal Reserve can print money and buy Treasuries, but in that capacity they are acting as a market participant - and buying new debt with freshly printed currency is an extremely dangerous practice, which, if continued, will surely lead to disaster.


It appears that you don't understand the Fed also can set the prime rate.
 
2013-03-04 10:17:09 AM  

MattStafford: BeesNuts: I don't doubt that the bond market will go through some kind of alteration in the next decade or two. Nor do I doubt that interest rates will rise, also in that time frame. I struggle with the same thing I struggled with before the specific culprit of bond yields arose

There is evidence that demand for US Treasuries will be lower in the future than it is now.  Lower demand means higher yields.  The US cannot afford higher yields on its debt, and if subjected to higher yields, would face an extremely serious economic (and social) crisis.  What more do you need to understand that there is a serious problem with our current financial situation?


Oh so you DO understand bond prices drop in a bull market. So why are you so paranoid? Lower prices means LOWER DEMAND. That means fewer bonds being sold. Volume decreases, even if yield increases per bond. This means the US government has to pay out less overall due to the new bonds being sold costing less. That's because, you know, fewer want the bonds, and the US government's revenue has INCREASED because people have work and more money to spend, and are paying more into the treasury.

And thanks to cameroncrazy1984, people are now using e-how to disprove your idiocy. Begone, coconut lord. Next time it'll be Wikipedia itself. You know what, screw it. I'll see if I have an Uncle John's Bathroom Reader somewhere, and use something in there to disprove your bullcrap.
 
2013-03-04 10:18:32 AM  

verbaltoxin: Bond prices drop in a good economy, because people tend to have more cash to put into stocks.


Ceteris paribus, you are making the argument that bond yields are positively correlated with the strength of an economy?  The stronger the economy, the higher the yields?
 
2013-03-04 10:19:21 AM  

Stile4aly: MattStafford: BeesNuts: I don't doubt that the bond market will go through some kind of alteration in the next decade or two. Nor do I doubt that interest rates will rise, also in that time frame. I struggle with the same thing I struggled with before the specific culprit of bond yields arose

There is evidence that demand for US Treasuries will be lower in the future than it is now.  Lower demand means higher yields.  The US cannot afford higher yields on its debt, and if subjected to higher yields, would face an extremely serious economic (and social) crisis.  What more do you need to understand that there is a serious problem with our current financial situation?

Of course there will be higher yields in the future.  We're at a record low because of a farking global economic collapse.  When those higher yields come, they will apply to new debt, not the existing obligations.Our current ability to borrow is practically at will and what's more the rates on our new debt are such that when inflation is taken into account we will end up paying a negative return in real dollars.  In short, this is not an immediate concern.  We can devise a tax structure that would allow us to do some borrowing now to pay for jobs to keep our roads and bridges from collapsing and still be able to pay that debt off in 30 years.


cameroncrazy1984: MattStafford: cameroncrazy1984: http://www.ehow.com/about_6828637_prime-interest-rate-effect-bonds.h tm l

Sorry, it appears that your economics degree missed this little tidbit.

Its almost like you didn't read my post.  The Federal Reserve can print money and buy Treasuries, but in that capacity they are acting as a market participant - and buying new debt with freshly printed currency is an extremely dangerous practice, which, if continued, will surely lead to disaster.

It appears that you don't understand the Fed also can set the prime rate.


Just QFT'ing for coconut economists out there.
 
2013-03-04 10:19:21 AM  

verbaltoxin: And thanks to cameroncrazy1984, people are now using e-how to disprove your idiocy. Begone, coconut lord. Next time it'll be Wikipedia itself. You know what, screw it. I'll see if I have an Uncle John's Bathroom Reader somewhere, and use something in there to disprove your bullcrap


This could be a fun game. What's the most basic fact that we can stump  MattStafford on using the most random of sources?
 
2013-03-04 10:21:30 AM  

cameroncrazy1984: Intragovernment debt holdings currently stand at about $4.6T. Out of a total of about $16T

I'm sorry, you were saying something about the government buying all of our new debt?


Did you somehow miss the word new?  The fark is wrong with your reading comprehension?  And I know they aren't buying all of our new debt, but the Federal Reserve is monetizing a significant portion of it.
 
2013-03-04 10:21:55 AM  

MattStafford: verbaltoxin: Bond prices drop in a good economy, because people tend to have more cash to put into stocks.

Ceteris paribus, you are making the argument that bond yields are positively correlated with the strength of an economy?  The stronger the economy, the higher the yields?


Holy f*cking sh*t, is it so hard to read the Investopedia link in my goddamned comment? It explains exactly what the relationship is between bond prices and yields in the economy. It's inverse. It's the exact situation we have RIGHT NOW: high bond prices and low yields, and a weakened economy that's slowly leaving a recession.

How hard is that to understand? Seriously.
 
2013-03-04 10:23:05 AM  

cameroncrazy1984: No, it isn't. You have yet to be able to provide evidence that they are entering these agreements "to bypass the dollar"


Why else would China enter into these agreements, except to bypass the dollar.  Before they made the agreement, if China wanted to trade with Australia, they would first have to convert to the USD.  Now, they no longer have to do that.  Are you seriously making the argument that that was done for a reason besides bypassing the USD?
 
2013-03-04 10:23:28 AM  

MattStafford: And I know they aren't buying all of our new debt, but the Federal Reserve is monetizing a significant portion of it.


And you're also wrong about that. Try and keep up. Those numbers are from Jan 2013.
 
2013-03-04 10:23:30 AM  

MattStafford: cameroncrazy1984: Intragovernment debt holdings currently stand at about $4.6T. Out of a total of about $16T

I'm sorry, you were saying something about the government buying all of our new debt?

Did you somehow miss the word new?  The fark is wrong with your reading comprehension?  And I know they aren't buying all of our new debt, but the Federal Reserve is monetizing a significant portion of it.


No one can have this little self-awareness, right?
 
2013-03-04 10:23:55 AM  

madgonad: Only if you consider inflation a disaster. The rich certainly do. Middle class homeowners see it as a mixed bag. Sure, you buy less stuff, but paying the mortgage isn't a big deal anymore.

Maybe the Democrats should frame the issue that way? The rich better get comfortable paying more taxes, because the inflation caused by NOT addressing this problem will hurt a whole lot more.


Inflation primarily hurts the poor and middle class, as they have less access to inflation proof investments.
 
2013-03-04 10:24:26 AM  

MattStafford: cameroncrazy1984: No, it isn't. You have yet to be able to provide evidence that they are entering these agreements "to bypass the dollar"

Why else would China enter into these agreements, except to bypass the dollar.  Before they made the agreement, if China wanted to trade with Australia, they would first have to convert to the USD.  Now, they no longer have to do that.  Are you seriously making the argument that that was done for a reason besides bypassing the USD?


A) China enters these agreements to strengthen trade agreements with countries that are not the US.

B) Why would they continue to pin the Yuan to the dollar if they wanted to move away from it?
 
2013-03-04 10:24:37 AM  

cameroncrazy1984: verbaltoxin: And thanks to cameroncrazy1984, people are now using e-how to disprove your idiocy. Begone, coconut lord. Next time it'll be Wikipedia itself. You know what, screw it. I'll see if I have an Uncle John's Bathroom Reader somewhere, and use something in there to disprove your bullcrap

This could be a fun game. What's the most basic fact that we can stump  MattStafford on using the most random of sources?


I say we just go to the same place he probably does, Zero Hedge, and use his own BS against him.
 
2013-03-04 10:24:56 AM  

Stile4aly: When those higher yields come, they will apply to new debt, not the existing obligations.


You realize we issue serious amounts of debt all the time, right?  If yields ticked up today, we would face serious funding constraints.
 
2013-03-04 10:25:13 AM  

cameroncrazy1984: A) China enters these agreements to strengthen trade agreements relations with countries that are not the US.


FTFM
 
2013-03-04 10:25:48 AM  

verbaltoxin: cameroncrazy1984: verbaltoxin: And thanks to cameroncrazy1984, people are now using e-how to disprove your idiocy. Begone, coconut lord. Next time it'll be Wikipedia itself. You know what, screw it. I'll see if I have an Uncle John's Bathroom Reader somewhere, and use something in there to disprove your bullcrap

This could be a fun game. What's the most basic fact that we can stump  MattStafford on using the most random of sources?

I say we just go to the same place he probably does, Zero Hedge, and use his own BS against him.


Sorry, I left my barn boots at my grandparents' house.
 
2013-03-04 10:26:02 AM  

MattStafford: madgonad: Only if you consider inflation a disaster. The rich certainly do. Middle class homeowners see it as a mixed bag. Sure, you buy less stuff, but paying the mortgage isn't a big deal anymore.

Maybe the Democrats should frame the issue that way? The rich better get comfortable paying more taxes, because the inflation caused by NOT addressing this problem will hurt a whole lot more.

Inflation primarily hurts the poor and middle class, as they have less access to inflation proof investments.


This just in: the poor can afford to invest right now. Or at any time. And apparently lower bond prices means fewer people can afford them. Black is really night. The Moon is just the Sun at night. More at 10.
 
2013-03-04 10:27:18 AM  

NateGrey: lol You are kidding right? You never provide evidence. You simply make stupid statements and are called out on it. You are the guy who tried to use an isolated island as an analogy for the Economy? The same guy who tried to equate the US Budget to a Household Budget when even Rush Limbaugh says thats wrong? Absolutely and utterly stupid.


So was I wrong about China not increasing their holdings of Treasuries relative to their past purchases recently?  I can post the graph again that shows their Treasury holdings leveling off again, if that would help.  Am I wrong about China making massive investments in gold over the past few years?  Because I can source that.  Am I wrong about China making numerous bilateral trade agreements to bypass the dollar?  Sources on sources on sources for that?  What makes you think China will continue to buy large amounts of treasury debt when their actions indicate just the opposite?
 
2013-03-04 10:27:35 AM  

MattStafford: Stile4aly: When those higher yields come, they will apply to new debt, not the existing obligations.

You realize we issue serious amounts of debt all the time, right?  If yields ticked up today, we would face serious funding constraints.


But...they haven't. So you're point is, as usual, "But bond yields!"

All your statements rely on "if" and yet you can't be bothered to predict anything.
 
2013-03-04 10:27:57 AM  

s2s2s2: THERE WOULD BE NO SEQUESTER IF GENE SPERLING HADN'T COME UP WITH IT!

FTFY

Guess where Gene works.


the sequester was created as part of a deal reached with congressional republicans when they threatened to refuse to raise the debt ceiling - which would have caused america to default on its debt obligations. if republicans had simply raised the debt ceiling - AS THEY HAD DOZENS OF TIMES BEFORE* - there would have been no sequester. this GOP brinksmanship, by the way, caused markets to tumble, the US to receive a credit downgrade and the economy to stall.

and let's not forget, the sequester itself was created as a penalty for the failure of the so-called "super-committee" to reach a budget deal. the super-committee that was mandated by the aforementioned agreement.

republicans refused to negotiate on taxes, so the deal wasn't reached. and therefore the sequester happened.

*before the black guy became president, that is
 
2013-03-04 10:28:10 AM  

MattStafford: Stile4aly: When those higher yields come, they will apply to new debt, not the existing obligations.

You realize we issue serious amounts of debt all the time, right?  If yields ticked up today, we would face serious funding constraints.


Why? Usually when yields tick up we sell less of them as other investments become "safer"

How can one economist be  so wrong about everything in his field? I only took a few classes at university and I know more than you do.
 
2013-03-04 10:28:20 AM  

cameroncrazy1984: It appears that you don't understand the Fed also can set the prime rate.


How do they do that again?
 
2013-03-04 10:29:55 AM  

verbaltoxin: That's because, you know, fewer want the bonds, and the US government's revenue has INCREASED because people have work and more money to spend, and are paying more into the treasury.


I'm not sure why you are acting as though this is a foregone conclusion.  Are you stating the only possible way for yields to rise is if the economy improves?  Yields can rise without the economy improving.  I'm sure you are aware of that, however.
 
2013-03-04 10:30:37 AM  
From Rubinit: The president is interested in breaking the back of the opposition not accommodating or passing centrist legislation.

If ONLY this were true now!  IF ONLY this had been true since election day in 2008!!
 
2013-03-04 10:30:40 AM  

MattStafford: I'm not sure why you are acting as though this is a foregone conclusion.


We could ask you the same question.
 
2013-03-04 10:31:24 AM  

MattStafford: NateGrey: lol You are kidding right? You never provide evidence. You simply make stupid statements and are called out on it. You are the guy who tried to use an isolated island as an analogy for the Economy? The same guy who tried to equate the US Budget to a Household Budget when even Rush Limbaugh says thats wrong? Absolutely and utterly stupid.

So was I wrong about China not increasing their holdings of Treasuries relative to their past purchases recently?  I can post the graph again that shows their Treasury holdings leveling off again, if that would help.  Am I wrong about China making massive investments in gold over the past few years?  Because I can source that.  Am I wrong about China making numerous bilateral trade agreements to bypass the dollar?  Sources on sources on sources for that?  What makes you think China will continue to buy large amounts of treasury debt when their actions indicate just the opposite?


So you're saying bond demand overseas is falling......

Hmm, when bond demand decreases what effect does that have on bond prices, exactly?

(Kids, time to remember that Investopedia link I gave not but a half hour ago.)

It's almost like the economy were....slowly recovering....and that would mean, that maybe, just maybe, the demands for bonds have slipped a little?

Hmm, I wonder what else has changed the last few years? Lower unemployment rates, slightly higher tax revenue, decreasing war costs...

Yes it's almost as if everything you're claiming will happen is happening in the opposite direction. And China's bond demands are reflecting that.
 
2013-03-04 10:33:13 AM  

MattStafford: verbaltoxin: That's because, you know, fewer want the bonds, and the US government's revenue has INCREASED because people have work and more money to spend, and are paying more into the treasury.

I'm not sure why you are acting as though this is a foregone conclusion.  Are you stating the only possible way for yields to rise is if the economy improves?  Yields can rise without the economy improving.  I'm sure you are aware of that, however.


Yeah when say, a central entity raises the prime rate yields can rise, as you apparently don't know, based on what we've seen so far.
 
2013-03-04 10:34:17 AM  

MattStafford: DeaH: I live in a base town. Furloughs are scheduled to begin in April. If the Republicans want the cuts to be permanent, we'll see how happy their voters are come April.

Would you prefer a slow down in spending on that base now, or a complete shut down of that base at some point in the future?  Those are the options we are being presented with, and having politicians make the choice for the long term over the short term is impressive, even if unintentional.


Actually, I doubt Wright Patt would be one of the bases that closes at any time in the near future. I have no problem with cuts to military spending. It's indiscriminate, across-the-board cuts that are the problem. You are presenting a false choice. The real option would be to look at things that are not needed (live certain weapons systems the military has said it doesn't need), not cuts to everything. And it's not just slow spending now, or lose everything later. It's more like a punnet square where "Big Cuts During a Weak Economy" and "Big Cuts During a Strong Economy" are along one side and "Smart Cuts" and "Indiscriminate Cuts" are along the top. We are now in the Dumb Cuts/Big Cuts During a Weak Economy square.
 
2013-03-04 10:36:25 AM  

verbaltoxin: Holy f*cking sh*t, is it so hard to read the Investopedia link in my goddamned comment? It explains exactly what the relationship is between bond prices and yields in the economy. It's inverse. It's the exact situation we have RIGHT NOW: high bond prices and low yields, and a weakened economy that's slowly leaving a recession.

How hard is that to understand? Seriously.


I'm not talking about the relationship between yields and prices, I'm talking about the relationship between the strength of an economy and bond yields.  You are acting as though the only possible way for yields to rise is if the economy gets stronger - this is not the case.  Yields can rise because an economy is weak as well.
 
2013-03-04 10:37:46 AM  

MFK: THERE WOULD BE NO SEQUESTER IF REPUBLICANS HADN'T HELD AMERICA'S CREDIT HOSTAGE IN THE SUMMER OF 2011 OBAMA HADN'T SUGGESTED IT.

 
2013-03-04 10:37:46 AM  

MattStafford: I'm talking about the relationship between the strength of an economy and bond yields.  You are acting as though the only possible way for yields to rise is if the economy gets stronger - this is not the case.  Yields can rise because an economy is weak as well.


Please show us when that has happened in the history of ever.
 
2013-03-04 10:42:19 AM  

MattStafford: verbaltoxin: Holy f*cking sh*t, is it so hard to read the Investopedia link in my goddamned comment? It explains exactly what the relationship is between bond prices and yields in the economy. It's inverse. It's the exact situation we have RIGHT NOW: high bond prices and low yields, and a weakened economy that's slowly leaving a recession.

How hard is that to understand? Seriously.

I'm not talking about the relationship between yields and prices, I'm talking about the relationship between the strength of an economy and bond yields.  You are acting as though the only possible way for yields to rise is if the economy gets stronger - this is not the case.  Yields can rise because an economy is weak as well.


I'm not "acting" anything. I literally explained what happens in the market. It's a phenomenon so well-understood, it's in every Investing 101 book everywhere. Which you seem to haven't read. I even explained WHY it happens. I did it in the most basic way possible, outside of using coconuts to analogize it. I also answered why yields could go up on bonds during a bad economy - which you also conveniently ignored.

It doesn't need reexplaining that US bonds are not Greek bonds. We're in no danger of reaching junk status. Greek bonds are cheap, but their yield is high due to RISK. Greek bonds are high risk due to their lack of industry, high unemployment, huge (Vastly huge per capita) debt, and inability to borrow cheaply. The US has high debt but we have ways to pay it off. Our bonds are also expensive with low yields. There's reasons for all this, but you, the pretend economist, have no way to explain that.
 
2013-03-04 10:43:15 AM  

SunsetLament: MFK: THERE WOULD BE NO SEQUESTER IF REPUBLICANS HADN'T HELD AMERICA'S CREDIT HOSTAGE IN THE SUMMER OF 2011 OBAMA HADN'T SUGGESTED IT.


New right wing talking point: suggestion = order from on high. Congress just had no choice, folks! Obama suggested it!
 
2013-03-04 10:43:35 AM  

MattStafford: You realize we issue serious amounts of debt all the time, right? If yields ticked up today, we would face serious funding constraints.


And if my aunt had balls she'd be my uncle. Bond yields are not going up substantially in the next thirty years or more; the market as a whole has placed a tremendous bet that Treasury yields over the next several decades will be in the low single digits, and ten-year Treasury yields are well below 2% despite the House of Representatives nearly causing a default twice in the last two years and a credit rating downgrade.

Furthermore, by constantly harping about "average" bond yields you only demonstrate your ignorance. The distribution of bond yields since 1900 shows tremendous positive skew because of the Volcker intervention to fix the economic issues caused by stagflation, which are highly unlikely to repeat themselves again anytime soon (meaning this century). A simple histogram of bond yields shows this very clearly. Refusing to take the steps necessary to return us to economic growth because of fears of a low-probability event that we can solve anyway if it comes to that is beyond foolish.
 
2013-03-04 10:43:54 AM  

verbaltoxin: But...they haven't. So you're point is, as usual, "But bond yields!"

All your statements rely on "if" and yet you can't be bothered to predict anything.


I've made a ton of predictions - I'm only refusing to predict a time frame.  You're making the argument that bond yields will stay historically low in the near future.  I'm making the argument that they will not.

The reasons I believe bond yields will increase in the near future:  Central banks have been moving en masse to gold.  Our largest purchaser of treasuries, the SSTF, will no longer be increasing their holdings.  Our largest foreign purchaser of treasuries, China, will no longer be increasing their holdings.  Several of our other large foreign purchasers, particularly Europe and Japan, are not in position to increase their Treasury holdings.  The Federal Reserve is already monetizing a great deal of Treasuries in order to keep their yields down.

This all indicates to me that there will be a serious drop in demand for Treasuries in the near future, and the Federal Reserve will try to monetize the Treasuries to keep yields low.  This is obviously an unsustainable and short sighted practice.

So that is my argument - what is your argument about why yields will stay low in the future?  Who will be buying the bonds?
 
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